Biden Plan: An ACA 2.0/Medicare for America hybrid

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Joe Biden released a healthcare reform plan outline today. It looks like a cross between the Medicare for America bill, which would create a strong national public option, and various "ACA 2.0" bills, which would bolster ACA premium subsidies and reduce enrollees' out-of-pocket costs.

In brief, here are the core features of these antecedents:

• ACA 2.0 bills and plans, including Elizabeth Warren's, are generally variants on an ACA enhancement plan published in August 2015 by Urban Institute scholars Linda Blumberg and John Holahan.  The core is simply to increase ACA premium subsidies and extend them to more people. Blumberg and Holahan proposed raising the ACA benchmark, against which subsidies are calculated, from "silver" to "gold" - -that is, from an actuarial value of 70% (paying that percentage of the average user's annual medical costs) to 80%. They further proposed raising AV higher than that income levels up to 300% FPL, improving the ACA's Cost Sharing Reduction subsidies at lower income levels; reducing the percentage of income paid for the benchmark at every income level; and capping premiums as a percentage of income at 8.5% for anyone at any income level who lacks access to employer insurance or other insurance -- removing the ACA's 400% FPL income cap on subsidies. At bottom, I've posted Blumberg and Holahan's proposed premium and AV schedule.


• The Medicare for America Act of 2019 would create a revamped Medicare available to people at all income levels, paying Medicare rates (adjusted modestly) to providers, and costing no one more than 8% of income. All Americans would be eligible for income-based premium subsidies, even if their employers offer affordable coverage. The plan would be free -- with no cost-sharing -- to people with incomes below 200% of the Federal Poverty Level (FPL). Newborns would be auto-enrolled. Employers could "buy in" by paying a payroll tax, or continue to offer coverage. Existing Medicare and Medicaid would be integrated into the new program, which would include long-term care insurance. Medicare would negotiate drug prices, and a price review board would be empowered to crack down on price gouging.

Ambiguity on key points

Biden's plan would establish "a public health insurance option like Medicare" that, "like Medicare...will reduce costs for patients by negotiating lower prices from hospitals and other health care providers."  Note that it's not entirely clear whether this option will simply adopt Medicare prices or negotiate separately -- in fact, the language implies the latter. The plan will be available to anyone, including those with access to employer insurance -- but here too the language is ambiguous; it's not clear whether those with access to employer insurance would be eligible for subsidies.

Like the ACA 2.0 bills, the Biden plan would raise the ACA benchmark to gold (80% AV), improve subsidies down the line, and cap premiums as a percentage of income at 8.5%. Here the language does imply that all comers are eligible for subsidies, regardless of access to other insurance: "This means that no family buying insurance on the individual marketplace, regardless of income, will have to spend more than 8.5% of their income on health insurance." But is that implication accidental? It's not spelled out that those with access to other insurance are subsidy eligible. Topher Spiro of the Center for American Progress, who helped design Medicare for America, asserts that the proposal's announced $750 billion/10 year price tag would not cover that extension of subsidy eligibility.

[Update, 7/29: The plan does state, "If a family is covered by their employer but can get a better deal with the [marketplace's] 8.5% premium cap, they can switch to a plan on the individual marketplace, too."  I missed that. But Spiro's point about cost remains. And it's not entirely clear whether people at lower income levels, who would pay a lower percentage of income for the public option or other marketplace plans, can buy in at their prescribed income percentage if their employer offers insurance, or whether they'd have to pay 8.5% of income for a benchmark plan under those circumstances.]

Biden's plan would also open the public option at zero cost to  people in states that refused to implement the ACA Medicaid expansion whose incomes would have qualified them for Medicaid (i.e., those with comes up to 138% FPL). That also is a leaf of sorts taken from  Medicare for America, which would fold Medicaid into the revamped "Medicare" and enroll those with incomes up to 200% FPL income at zero premium with zero out-of-pocket cost. As Larry Levitt of the Kaiser Family Foundation and others have pointed out, this option might lead states that have accepted the ACA expansion to drop it -- in favor of a new public plan that presumably would be accepted by more providers and pay something like Medicare (not Medicaid) rates. Arguably, this option implies the need for the public option to absorb Medicaid, as the Medicare for America creators decided it must.

Like Medicare for America, the Biden plan would empower Medicare to negotiate drug prices, establish a drug price review board, albeit specifically for biotech drugs, and impose price increase controls on other drugs. The plan would also end balance billing. Biden further pledges to work to repeal the Hyde Amendment, roll back restrictive state abortion laws, restore Planned Parenthood funding, restore LGBTQ protections. and do a host of other good stuff, some by administrative rule, and some by legislation that would probably depend on a Democratic House and Senate and an end to the filibuster.

My working assumption here is that Biden's public option would be offered in the ACA marketplace, with benefits conforming to those stipulated in a revamped price/AV schedule along the lines of the Blumberg-Holahan schedule below.  But that is not spelled out, as Larry Levitt has pointed out. A public option with a different benefit structure would layer on still more complexity in a system that's already too complex.

"Modular" Medicare Expansion?

In my view, the sluice gate to real transformation of the U.S. healthcare system is a national public option that anyone can buy into on an income-adjusted basis, even if they have access to employer insurance. As noted above, it's not entirely clear whether Biden's plan allows that. As far as can be determined, it's pretty close to the kind of plan that I imagined early this year the final handful of presidential candidates might converge on:

What if the newly elected president has run on some kind of commitment to Medicare for all? I suspect the eventual winner (if a Democrat) is likely to hedge, as many Congressional candidates did, and advocate a path to Medicare for all...

To leave the prospective candidate some flexibility, I would look for a plan to be as modular as possible. First steps might include a strong public option introduced into the ACA -- one tied to Medicare rates, that providers who accept Medicare would have to accept.  Such a plan would probably also entail raising the value of a benchmark ACA plan, as the Merkley-Murphy Choose Medicare Act does. The ACA's silver benchmark, with an actuarial value of 70%, clearly has not cut it with the public (in some cases, it now includes deductibles as high as $6,000). Incremental steps include allowing small business buy-in and (simultaneously or at later phase) large employer buy-in. The point is that integrating first steps with an ACA upgrade enables next steps to be contingent -- on need, budget and system performance.

Looks like I was wrong. When Warren went all-in on Medicare for All in the CNN debate, a prop was knocked out from under Medicare buy-in plans.  I don't see how she could go all-out in 2021 to enact something like Bernie's utopian bill without giving up on all her other plans to remake American capitalism. But the center in the Democratic presidential candidates' healthcare debate is left of Biden at present.

Appendix: The Blumberg-Holahan ACA 2.0 subsidy schedule